A branch of Citibank in New York is shown. The US Treasury is starting to sell some of the shares it owns in the big bank and expects to turn a profit..

Richard Drew/AP

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The government bailout tab for banking giant Citigroup is getting smaller.

On Monday, the US Treasury announced plans to downsize its ownership stake in the bank by starting to sell shares of Citigroup stock to the public. The move promises to reap money for taxpayers and would bring the bank a step closer to standing on its own, without the government as an investor.

In the end, the Treasury might turn a profit on its $45 billion investment in Citi – as it has done with less-distressed banks that received funds from the Troubled Asset Relief Program (TARP).

The department initially swapped $25 billion of its bailout money for an equity stake in Citi at $3.25 per share. Now those shares are valued by investors at about $4.60 per share.

Costs of the bailout to taxpayers

It's good news for taxpayers that bailouts are turning out to be less costly than expected, and in some cases, profitable. But that doesn't mean the entire TARP program will turn a profit, or that the financial crisis hasn't imposed large-scale costs on ordinary Americans.

The TARP fund, created by Congress during the depths of the crisis in 2008, may end up costing taxpayers $117 billion, according to a Treasury estimate that officials call "conservative." That's way down from earlier estimates of $341 billion (as of August 2009) or more. Many banks have been able to pay back their TARP money, while losses are still expected on the rescue of AIG and automakers General Motors and Chrysler. (Although GM recently repaid its loan from the Treasury, taxpayers may still lose money on an equity stake in the carmaker.)

The Federal Reserve has remained profitable overall in the past two years, despite its bailout activities.

Fannie Mae and Freddie Mac, the firms that stand behind most US mortgage loans, remain in government conservatorship, with high costs to taxpayers.

It's not the costs of the direct bailouts that have had the biggest effect on America, though. Instead, the biggest costs of the financial crisis can be found in broader impacts. As the financial system tottered, and prominent sources of credit dried up, a deep recession with 10 percent unemployment was the result.

In turn, the recession caused tax revenue to fall and the costs of government to go up – both in automatic payments like food stamps and in special programs such as the Obama stimulus package. National debt is rising faster than it would have without the crisis.

Treasury eventually to sell 1.5 billion shares of Citi

Given all that, taxpayers can be grateful for signs of progress, including at Citigroup. Overall, the government owns more than one-fourth of Citigroup, and now plans to unload that stake by gradually selling roughly 7.7 billion shares in the company.

"Treasury will begin selling its common shares in the market in an orderly fashion under a prearranged written trading plan with Morgan Stanley," the sales agent for the deal, the department said in a statement Monday. Initially, the portion to be sold amounts to 1.5 billion shares.